India supports business innovation through the Section 35 R&D deduction, administered by the Income Tax Department (CBDT). The incentive is designed to lower the after-tax cost of qualifying research and development.
Like most national R&D programs, eligibility turns on the nature of the work, resolving genuine technical or scientific uncertainty through systematic investigation, rather than on the industry a company operates in.
Rates, refundability, and deadlines change over time and can depend on company size. Confirm the current parameters with the Income Tax Department (CBDT) or a qualified local adviser before you rely on any figure.
Who qualifies
- Companies subject to tax in India that perform qualifying R&D.
- Eligibility is activity-based; software, manufacturing, life sciences, cleantech, and engineering are common claimant profiles.
- Company size may affect the rate or refundability, so confirm your specific position.
Eligible activities
- Systematic work to resolve scientific or technological uncertainty.
- Development or significant improvement of products, processes, or software.
- Qualifying costs commonly include staff time, contractors, and consumables, subject to local rules.
Typically not eligible
- Routine work with no technical uncertainty.
- Market research, cosmetic changes, and routine quality control.
- Activities excluded by local legislation.
How a claim works
- 1
Confirm current rules
Check the latest guidance from the Income Tax Department (CBDT) for rates, refundability, and deadlines.
- 2
Identify qualifying projects
Map each project to the technical uncertainty it set out to resolve.
- 3
Keep contemporaneous evidence
Document hypotheses, experiments, and outcomes as the work happens.
- 4
Cost the claim
Compile eligible staff, contractor, and consumable costs under local rules.
- 5
File and support the claim
Submit through the required route and retain evidence for any review.
What to document
- Dated technical narratives describing the uncertainty and the work performed.
- Time and cost records tied to qualifying activities.
- Supporting evidence such as test logs, version history, and design records.
- Invoices and contracts for claimed expenditure.
Common pitfalls
- Missing program deadlines.
- Describing outcomes instead of the uncertainty and systematic work.
- Claiming routine development as qualifying R&D.
- Reconstructing evidence after the fact.
Questions to ask an advisor
- “What is your current reading of the Section 35 R&D deduction rules and rates?”
- “What is your fee model, and is any part contingent on the benefit?”
- “Who writes the technical narrative: a tax specialist or a technical expert?”
- “What is your track record with reviews by the local authority?”
Frequently asked
Who can claim the Section 35 R&D deduction?
Companies subject to tax in India that perform qualifying R&D. Eligibility depends on the work, not the sector. Confirm your position with the Income Tax Department (CBDT).
How much is the benefit?
Rates and refundability change over time and can depend on company size. An illustrative figure is: Illustrative planning rate. Confirm the current parameters with the Income Tax Department (CBDT) or a local adviser.
Is this tax advice?
No. This explainer is educational. Always confirm eligibility and current rules with a qualified adviser and official guidance.